Indeed, having a personal loan is a good way to get started especially if you do not have the necessary cash flow you need. This is true whether you are financing your studies, paying off credits, or consolidating debts.
In a personal loan, you can be able to borrow cash from a lender that you can pay off with an interest on a given period. You have the choice to have your loan with collateral and this is referred to as a secured loan. On the other hand, you can get your lenders to use your credit history to determine your loan eligibility. This is referred to as an unsecured loan. Remember that the type of loan you will have will determine the interest rate that your lenders will provide you.
As such, before you consider any type of loan, make sure that you learn about the essentials of personal loan Singapore. This way, you can be guided in choosing the best type of loan to get.
Various Kinds of Personal Loans
There are various types of personal loans to try if you are in immediate need of cash. Here are some of the common types of personal loans:
Term Loan
The most basic type of commercial loan is known as the term loan. In this type of loan, you can have a monthly or quarterly payment schedule that has a fixed interest rate.
In general, small businesses with financial statements and sound business plans can be able to apply for this type of loan. They can have this from trustworthy lending bodies such as banks without experiencing any issues. This is possible so long as the small businesses can be able to prove that it can earn a considerable income. Also, it must lessen the cost of the loan which is fixed each month or quarter.
The term loans are classified as short-term, intermediate, or long-term loans. Short-term loans are less than 18 months of payments. Intermediate-term loans are less than three years of payment. Finally, long-term loans are more than three years of payments. For questions, Visit MoneyIQ now.
Short-Term Loans
These are types of loans that the lender offers to businesses that are not as financially strong as others. For example, if the financial statements of some businesses are not good enough to qualify for a credit, then the bank may be able to offer short-term loans as an alternative.
For this loan, there is no need to have collateral such as company assets. Short-term loans come with balloon payments. This refers to a lump sum that the company will pay at the end of the loan contract. This will reduce the number of monthly payments at the start of the loan. This will help build the capital and prepare for the lump-sum payment.
Meanwhile, for intermediate-term loans, the payments are done each month. Usually, it is paid through the company’s cash flow. Similar to short-term loans, intermediate-term loans can become a balloon loan. The monthly payments can be lower with a lump sum amount that can happen at the end of the loan.
In its early stage, balloon loans can help your businesses. However, it can be very risky especially if the company fails to accumulate capital through the duration of the term loan. Indeed, businesses must be confident of the strategy and plan of their business. This is true before starting to select the balloon short-term or intermediate-term plan.
Long-term loans will offer the maximum amount that you can use as capital. The repayments are acquired from the company’s profits and cash flow. Businesses can also use company assets as collateral. It is the discretion of the lenders on the specific financial decision of these companies. Furthermore, in long-term loans, the companies are required to set aside one part of their profit for the repayment of the loan. For questions, visit easy credit now.
Secured Loans vs Unsecured Loans
When choosing these two kinds of personal loan Singapore, there are both advantages and disadvantages from the lender and the borrower.
Because the unsecured loans do not require collateral, the bank will rely on your creditworthiness. This refers to your ability to pay back the money that you owe them before approving your application. In this type of loan, you will have to pay higher interest rates versus secured loans. This is because there is a heavier risk involved whenever they let you borrow the money.
Indeed, there are lower interest rates with secured loans. However, it will require collateral before it is approved. Sometimes, banks will require you to open a savings account with them. Furthermore, you can only borrow up to 90% of the amount that you place in the bank. Whenever you can no longer pay the amount, the bank will take the money you have deposited in your savings account.
